2008 (6) TMI 12 - AT - Service Tax

Appeal allowed: Commission-based orders /= service tax. Clearing agent role key.

The Tribunal allowed the appeal, setting aside the demand of service tax on the appellants who were procuring orders and receiving commission for a ... Demand confirmed by treating the appellants as clearing and forwarding agent - appellants are only procuring orders on behalf of the principal on commission basis - held that mere procuring of order or booking orders on commission basis for the principal would not amount to providing service of clearing and forwarding agent within the meaning of definition of that expression under Section 65(25) – assessee’s appeal is allowed Issues: Appeal against demand of service tax treated as clearing and forwarding agent.Analysis:The appellants filed an appeal against an order confirming the demand of service tax by considering them as clearing and forwarding agents. The Revenue argued that the appellants, by procuring orders and passing them to the principal for execution in exchange for commission, were providing services as clearing and forwarding agents. The Adjudicating authority relied on a previous decision to support this claim. However, the appellants contended that they were merely procuring orders and receiving commission, citing a different Tribunal decision that contradicted the earlier ruling. The Tribunal, in the case of Larsen & Tubro Ltd., held that simply procuring or booking orders on a commission basis for the principal did not qualify as providing services as a clearing and forwarding agent under the relevant law. As the appellants were only procuring orders on a commission basis for the principal, the Tribunal set aside the impugned order and allowed the appeal.This judgment clarifies the distinction between acting as a clearing and forwarding agent and merely procuring orders on a commission basis. It establishes that the provision of service as a clearing and forwarding agent involves more than just procuring orders for the principal. The decision in the Larsen & Tubro Ltd. case sets a precedent that procuring orders or booking them on a commission basis does not automatically classify an entity as a clearing and forwarding agent under the relevant legal definition. The ruling emphasizes the importance of considering the specific actions and responsibilities undertaken by an entity to determine whether they fall under the definition of a clearing and forwarding agent for the purposes of service tax liability.